Authors: David Yallop
Like Rome itself, Vatican wealth was not built in a day. The problem of a wealthy Church – and all who aspire to follow the teachings of Jesus Christ must regard that wealth as a problem – has its roots as early as the fourth century. When the Roman Emperor Constantine converted to Christianity and gave colossal wealth to the then Pope, Silvester I, he created the first rich Pope. Dante ends the
Inferno
with the lines:
Alas! Constantine, how much misfortune you caused,
Not by becoming Christian, but by the dowry
Which the first rich Father accepted from you.
The Catholic faith’s claim to uniqueness is valid. It is the only religious organization in the world which has as its headquarters an independent State, Vatican City, which is a law unto itself. At 108.7 acres it is smaller than many of the world’s golf courses, is the size of St James’s Park in London and approximately one eighth the size of Central Park in New York City. A leisurely stroll right round Vatican City takes something over an hour. To count the wealth of the Vatican would take rather longer.
The modern wealth of the Vatican is based on the generosity of Benito Mussolini. The Lateran Treaty which his government concluded with the Vatican in 1929 gave the Roman Catholic Church a variety of guarantees and measures of protection.
The Holy See obtained recognition of itself as a Sovereign State. It was exempted from paying taxes both for its properties and its citizens, exempted from paying duty on imported goods; it had diplomatic immunity and accompanying privileges for its own diplomats and those accredited to it by foreign powers. Mussolini guaranteed the introduction of Catholic religious teaching in all State High Schools and the entire institution of marriage was placed under Canon Law, which ruled out divorce. The benefits for the Vatican were many, not least the fiscal ones.
Article one. Italy undertakes to pay the Holy See, on the ratification of the Treaty, the sum of 750 million lire and to hand over at the same time Consolidated 5 per cent State Bonds to the bearer for the nominal value of one billion lire.
At the 1929 rate of exchange this package represented 81 million dollars. A 1984 equivalent figure is approximately 500 million dollars. Vatican Incorporated was in business. It has never looked back.
To handle the windfall, Pope Pius XI created on June 7th, 1929 The Special Administration. He appointed to run the Department the layman Bernardino Nogara. Apart from having many millions of dollars to play with, Nogara had another very important asset. One hundred years earlier the Roman Catholic Church had completely reversed its position on money lending. The Church can rightfully claim to have changed the meaning of the word usury.
In the classic sense usury means
all
gains from money lending. For over eighteen hundred years the Roman Catholic Church had dogmatically stated that the charging of any interest on a loan was absolutely forbidden as being contrary to Divine Law. The prohibition was restated in various Church Councils: Arles (
AD
314), Nicea (325), Carthage (345), Aix (789), Lateran (1139) – at this Council usurers were condemned to excommunication – various State Laws made the practice legal. It was still heresy, that is, until 1830. Thus, by courtesy of the Roman Catholic Church, usury now means lending money at exorbitant rates of interest.
Self-interest produced a total reversal on the Church’s teaching with regard to money lending. Perhaps if celibacy was no longer the rule for priests it might move the Roman Catholic Church’s teaching on birth control.
Nogara was a member of a devout Roman Catholic family; many of its members made in a variety of ways significant contributions to the Church. Three of his brothers became priests, another became director of the Vatican Museum but Bernardino Nogara’s contribution was by any standards the most profound.
Born in Bellano, near Lake Como, in 1870, he achieved early success as a mineralogist in Turkey. In 1912 he played a leading role in the peace treaty of Ouchy between Italy and Turkey. In 1919 he was again a member of the Italian delegation that negotiated the peace treaty between Italy, France, Britain and Germany. He subsequently worked on behalf of the Italian Government as a delegate to the Banca Commerciale in Istanbul. When Pope Pius XI was seeking a man capable of administering the fruits of the Lateran Treaty, his close friend and confidant Monsignor Nogara suggested his brother Bernardino. With that selection Pius XI struck pure gold.
Nogara was reluctant to accept the job and did so only when Pope Pius XI agreed to certain conditions. Nogara did not wish to be
trammelled by any traditional views the Church might still hold about making money. The ground rules Nogara insisted upon included the following:
1 Any investments he chose to make should be totally and completely free of any religious or doctrinal considerations.
2 He would be free to invest Vatican funds anywhere in the world.
The Pope agreed, and opened the doors to currency speculation, and to playing the market in the Stock Exchange, including the buying of shares in companies whose products were inconsistent with Roman Catholic teaching. Items such as bombs, tanks, guns, and contraceptives might be condemned in the pulpit but the shares Nogara bought for the Vatican in companies which manufactured these items helped to fill the coffers in St Peter’s.
Nogara played the gold market and the futures market. He bought Italgas, sole supplier of gas in many of Italy’s cities, placing on the Board on behalf of the Vatican Francesco Pacelli. Pacelli’s brother became, in time, the next Pope (Pius XII) and the nepotism which stemmed from that Papacy was manifest throughout Italy. The rule became ‘if there is a Pacelli on the Board, six to four it belongs to the Vatican’.
Among the banks that came under Vatican influence and control through Nogara’s purchases were Banco di Roma, Banco di Santo Spirito and Cassa di Risparmio di Roma. The man clearly not only had a way with money, he was fairly gifted in the art of persuasion. When Banco di Roma was floundering and threatening to take with it a large amount of Vatican money, Nogara persuaded Mussolini to take over the bank’s largely worthless securities and transfer them to a Government holding company, IRI. Mussolini also agreed that the Vatican should he reimbursed, not at the current market value of the securities, which was virtually nil, but at their original purchase price. IRI paid Banco di Roma over 630 million dollars. The loss was written off by the Italian treasury, which is another way of saying the ordinary people picked up the bill, just as they had been doing for the clerics since the Middle Ages.
Much of the speculation Nogara indulged in on behalf of the Vatican certainly contravened Canon Law and probably Civil Law, but as his client was the Pope, who was not asking questions, Nogara remained untroubled by such niceties.
Using Vatican capital, Nogara acquired significant and often controlling shares in company after company. Having acquired a company he rarely sat on the Board, preferring to nominate one of the trusted Vatican elite to look after the Church’s interests.
The three nephews of Pius XII, Princes Carlo, Marcantonio and Giulio Pacelli, were among the inner elite whose names began to appear as directors on an ever-growing list of companies. These were the Church’s ‘uomini di fiducia’, men of trust.
Textiles. Telephone communications. Railways. Cement. Electricity. Water. Bernardino Nogara was everywhere. When Mussolini needed armaments for his invasion of Ethiopia in 1935, a substantial proportion was supplied by a munitions plant which Nogara had acquired on behalf of the Vatican.
Realizing, before many, the inevitability of the Second World War, Nogara moved part of the assets then at his disposal into gold. He bought 26.8 million dollars’ worth of gold at 35 dollars per ounce. Later he sold 5 million dollars’ worth on the free market. The profit on the sale was in excess of the 26.8 million dollars he had paid for the entire original quantity. His speculations in gold continued throughout his control of Vatican Incorporated: 15.9 million dollars’ worth bought between 1945 and 1953; 2 million dollars’ worth sold between 1950 and 1952. My research indicates that 17.3 million dollars’ worth of that original purchase is still held on deposit on behalf of the Vatican at Fort Knox. At the current market price that 17.3 million dollars, originally purchased at 35 dollars per ounce, is now worth a figure approaching 230 million dollars.
In 1933 Vatican Incorporated again demonstrated its ability to negotiate successfully with Fascist governments. The Concordat of 1929 with Mussolini was followed with a Concordat between the Holy See and Hitler’s Reich. Solicitor Francesco Pacelli had been one of the key figures in the Mussolini agreement; his brother Cardinal Eugenio Pacelli, the future Pius XII, had a leading role as the Vatican’s Secretary of State in concluding a treaty with Nazi Germany.
Hitler saw many potential benefits in the treaty, not least the fact that Pacelli, a man already displaying marked pro-Nazi attitudes, might prove a useful ally in the approaching World War. History was to prove that Hitler’s assessment was accurate. Despite a great deal of world pressure, Pope Pius XII declined to excommunicate either Hitler or Mussolini. Perhaps his refusal was based on an awareness of just how irrelevant he was. His was a Papacy which affected neutrality, which talked to the German episcopate about ‘just wars’ and did
precisely the same to the French bishops. This resulted in the French bishops supporting France and the German bishops supporting Germany. His was a Papacy which declined to condemn the Nazi invasion of Poland because, he said, ‘We cannot forget that there are forty million Catholics in the Reich. What would they be exposed to after such an act by the Holy See?’
For the Vatican, one of the major assets to emerge from the very lucrative deal with Hitler was confirmation of the ‘Kirchensteuer’, Church Tax. This is a State tax which is still deducted at source from all wage-earners in Germany. One can opt out by renouncing one’s religion. In practice few choose to. This tax represents between 8 and 10 per cent on income tax collected by the German Government. The money is handed over to the Protestant and Catholic Churches. Substantial amounts derived from the Kirchensteuer began to flow to the Vatican in the years immediately preceding the Second World War. The flow continued throughout the war, 100 million dollars in 1943, for example. In the Vatican Nogara put the German revenue to work alongside the other currencies which were pouring in.
On June 27th, 1942, Pope Pius XII decided to bring another part of the Vatican into the modern world and into the ambit of Bernardino Nogara. He changed the name of the Administration of Religious Works to the Institute for Religious Works. The change did not capture the front pages of the world’s newspapers; they were rather preoccupied with the Second World War. The IOR, or the Vatican Bank as it is known by all but the Vatican, was born. ‘Vatican Incorporated’ had sired a bastard child. The original function of the Administration, set up by Pope Leo XIII in 1887, had been to gather and administer funds for religious works; it was in no sense a bank. Under Pius, its function became ‘the custody and administration of monies (in bonds and cash) and properties transferred or entrusted to the Institute itself by fiscal or legal persons for the purposes of religious works, and works of Christian piety’. It was, and is, in every sense a bank.
Nogara took to reading the terms of the Lateran Treaty very closely, particularly Clauses 29, 30 and 31 of the Concordat. These dealt with tax exemptions and the formation of new, tax-exempt ‘ecclesiastical corporations’ over which the Italian State would have no control. Interesting discussions began about the meaning of the phrase ‘ecclesiastical corporations’. Doubtless distracted by other events of the time, Mussolini took a liberal view. On December 31st, 1942, the Finance Ministry of the Italian Government issued a circular stating that the Holy See was exempt from paying the tax on share dividends.
It was signed by the then Director General of the Ministry, who was called quite appropriately Buoncristiano (Good Christian). The circular specified the various organizations within the Holy See which were exempt from the tax. The list was long and included The Special Administration and the Vatican Bank.
The man whom Nogara selected to control the Vatican Bank was Father, later Cardinal, Alberto di Jorio. Already functioning as Nogara’s assistant in The Special Administration, he kept a foot in both sections by retaining that position and assuming the role of First Secretary, then President, of the Vatican Bank. Apart from the controlling interests in many banks outside the Vatican walls which Nogara acquired, he now had two in-house banks to play with.
Nogara, applying his mind to the task of increasing the Vatican’s funds, went from strength to strength. The tentacles of ‘Vatican Incorporated’ spread world wide. Close links were forged with an array of banks. Rothschilds of Paris and London had been doing business with the Vatican since the early nineteenth century. With Nogara at the Vatican’s helm the business increased dramatically: Crédit Suisse, Hambros, Morgan Guarantee, The Bankers Trust Company of New York – useful when Nogara wanted to buy and sell stock on Wall Street – the Chase Manhattan, and Continental Bank of Illinois among others, became Vatican partners.
Nogara was evidently not a man with whom to play Monopoly. Apart from banks, he acquired for the Vatican controlling interests in companies in the fields of insurance, steel, financing, flour and spaghetti, mechanical industry, cement and real estate. With regard to the last named his purchase of at least 15 per cent of the Italian giant Immobiliare gave the Church a share of an astonishing array of property. Società Generale Immobiliare is Italy’s oldest construction company. Through its ownership of the building firm SOGENE, Immobiliare, and therefore to a significant degree the Vatican, owned after its 15 per cent acquisition: the Rome Hilton; Italo Americana Nuovi Alberghi; Alberghi Ambrosiani, Milan; Compagnia Italiana Alberghi Cavalieri; and Soc. Italiani Alberghi Moderni. These are just the major hotels in Italy. The list of major buildings and industrial companies also owned is twice as long.